Einstein Research — Portfolio Risk Analyzer

Portfolio Risk Analyzer

Overview

This skill performs a comprehensive, portfolio-level risk analysis. It goes beyond individual position risk to quantify systemic and correlated risks across the entire portfolio.

Core Features:

• Value at Risk (VaR): Calculates 95% and 99% VaR using Parametric, Historical, and Monte Carlo methods.
• Max Drawdown Analysis: Identifies historical and potential future maximum drawdowns.
• Correlation Matrix: Visualizes how positions move in relation to each other, highlighting diversification benefits or weaknesses.
• Stress Testing: Simulates portfolio performance during historical market crises (e.g., 2008 GFC, 2020 COVID crash, 2022 rate hikes).
• Concentration Risk: Identifies over-concentration in specific sectors, factors, or individual positions.
• Beta Calculation: Measures portfolio volatility relative to benchmarks (SPY, QQQ).

When to Use This Skill

Explicit Triggers:

• "Analyze the risk of my portfolio."
• "What is my portfolio's Value at Risk?"
• "How would my portfolio perform in another 2008-style crash?"
• "Am I too concentrated in the tech sector?"
• "Calculate the max drawdown of my holdings."
• User asks about "portfolio risk," "drawdown," "VaR," "correlation," "stress test," or "concentration."

Implicit Triggers:

• User is concerned about a market downturn.
• User is adding a new large position and wants to understand its impact on overall portfolio risk.
• User is reviewing their overall asset allocation.

Workflow

Step 1: Ingest Portfolio Data

The analysis requires the current portfolio holdings, typically from a CSV or JSON file.

Input Format (portfolio.json):

{
  "positions": [
    { "ticker": "AAPL", "quantity": 100, "avg_price": 150.00 },
    { "ticker": "TSLA", "quantity": 50, "avg_price": 200.00 },
    { "ticker": "SPY", "quantity": 200, "avg_price": 400.00 }
  ],
  "cash": 25000
}

Step 2: Execute the Risk Analysis Script

The portfolio-risk-analyzer CLI tool runs the full analysis suite.

portfolio-risk-analyzer run \
  --portfolio path/to/portfolio.json \
  --benchmark SPY

The script performs the following calculations:

1. Fetches historical price data for all positions.
2. Calculates daily returns for each position and the total portfolio.
3. VaR:
   • Parametric: Assumes normal distribution of returns.
   • Historical: Uses the actual distribution of historical returns.
   • Monte Carlo: Simulates thousands of possible future return paths.
4. Max Drawdown: Finds the largest peak-to-trough decline in the portfolio's history.
5. Correlation: Computes the correlation matrix for all positions.
6. Stress Tests: Re-prices the portfolio based on the returns of historical crisis periods.
7. Concentration: Calculates weights by position, sector, and factor.

Step 3: Analyze the Output

The script generates a detailed report in both JSON and Markdown formats.

JSON Output (risk_report_YYYY-MM-DD.json):

• Contains all the raw data, calculations, and simulation results for programmatic use.

Markdown Report (risk_report_YYYY-MM-DD.md):

• Risk Summary:
  • Portfolio Beta: e.g., 1.15 vs. SPY
  • 99% VaR (1-day): e.g., "$5,200 (Your portfolio has a 1% chance of losing at least $5,200 on any given day)."
  • Historical Max Drawdown: e.g., "-28.5%"
• Concentration Analysis:
  • Top 5 Positions by Weight
  • Sector Allocation Chart
• Stress Test Results:
  • A table showing simulated P&L for 2008, 2020, and 2022 scenarios.
• Correlation Hotspots:
  • Lists the most highly correlated pairs of assets in the portfolio.
• Actionable Insights:
  • e.g., "Your portfolio is heavily concentrated in Technology (65%). Consider adding exposure to other sectors like Healthcare or Consumer Staples to improve diversification."
  • e.g., "The high correlation between AAPL and MSFT reduces diversification benefits. Consider trimming one or adding an uncorrelated asset."

Step 4: Present Findings to User

Synthesize the key findings from the Markdown report into a clear, actionable summary. Start with the most critical information (like high concentration or poor stress test results) and provide concrete suggestions for risk mitigation.